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How To Close A Limited Company That Never Traded

How To Close A Limited Company That Never Traded

Sometimes, you might start a company with good intentions, but things get in the way and the company never ends up trading. This might leave you wondering how to close a limited company that never actually traded.

Luckily, it is quite simple to close your limited company if it is dormant or has never traded. You will simply need to fill out form DS01, which is the application to strike off. You will need the agreement of all directors before this can be done.

In this article, we’ll explain the process of closing a limited company in more detail, including how long the process takes and everything you will need to consider before making the decision to close your limited company.

How Do You Close A Limited Company?

Whilst forming a limited company can be a straightforward process that can be completed in just a couple of hours, closing a limited company can be more challenging.

Fortunately, the process of closing a limited company that has never traded is slightly more straightforward than a trading company. To close a limited company that has never traded, you will need to take the following steps:

  1. Seek agreement from all directors and shareholders of the limited company.
  2. Complete the application to strike off form DS01.
  3. Submit the form to Companies House, along with a £10 filing fee.
  4. Your application to strike off will then be advertised in the Gazette for three months.
  5. If no objections are made, your business will be struck off the register after three months has passed. At this point, the company will cease to exist as a legal entity.

How Do I Close A Limited Dormant Company?

A dormant company is seen as inactive by HMRC. This means that the company is not currently trading. If a company is dormant, it will not be liable for VAT, PAYE or corporation tax, as the company will not have generated any income during the tax year.

Providing you can prove that your company has not generated any income or traded in any way, you won’t need to pay any taxes when the limited company closes.

To close a dormant company, you will need to seek agreement from all directors and shareholders of the limited company. Once you have got agreement, you will need to complete and submit form DS01, as well as paying a £10 filing fee to Companies House.

A notice of the pending closure of the company will then be published on the Gazette to inform any third parties of the impending closure of the business. If no objections are received within three months of the publication date, your company will be confirmed as closed.

Should I Close My Limited Company Or Make It Dormant

Should I Close My Limited Company Or Make It Dormant?

If you decide to stop trading through your limited company, you might be wondering whether you should close the company or make it dormant. This can be a difficult decision and unfortunately there isn’t a one size fits all answer to this question.

The main thing you will need to consider is whether you intend to start trading again in the future. If you think you might want to start trading again through your limited company in the future, whether that’s in a few months or several years, it is usually best to keep your company dormant. This will prevent other companies from trading under your name and mean that your company is there waiting for you when you are ready to start trading again. This is often the case for business owners that decide to take time out of the business, either as part of a career break or due to illness.

However, if you are certain that your business won’t ever trade again, it is best to close your limited company. After all, there’s no point keeping a business open if you are never planning to resume trading.

If you are unsure of the best way forward for your business, it is always a good idea to consult with a qualified accountant. They will be able to talk you through your options and help you to come to the right decision for your business.

How Quickly Can You Close A Limited Company?

If you are getting ready to close your limited company, you might be wondering how long the process will take.

Unfortunately, there are no guarantees when it comes to the time taken to close a limited company. The minimum time period is three months. This is because the application to close the business must be published in the Gazette for three months to give third parties a chance to raise any objections to the closure of the business.

If no objections are received, your limited company will be closed after the three month period has passed. However, if objections are received it can take significantly longer to close your limited company as these objections will need to be addressed and resolved before the closure is permitted.

How Much Does It Cost To Close A Limited Company UK?

Many people wonder how much it costs to close a limited company. After all, you need to know exactly how much you can expect to pay before you make the decision to close your company.

For dormant companies or companies that have never traded, the costs of closing the company are relatively low. When you submit your application to close your limited company, you will need to pay a £10 filing fee to Companies House before your application can be processed.

However, if your company has unsettled debts, you will find that the costs of closing your limited company will be considerably higher. This is because you will need to either pay your debts or put your company into liquidation. In this case, you could find that the costs of closing your limited company reach up to £7,500.

To find out more about the costs of closing your limited company, it is best to speak to a qualified accountant. They will be able to talk you through your options and guide you on the best way forward for the unique needs of your business.

Is It Illegal For A Dormant Company To Trade?

A dormant company is classified as HMRC as being a company that does not have any significant accounting transactions during the accounting period. The only transactions that can be made by a dormant company are:

  • Payment of a penalty to HMRC for the late filing of accounts.
  • Payments for shares from the first shareholders of the company.
  • Fees that are paid for re-registration of the company, a change in the company name or for filing accounts.

If a business begins to make transactions during the dormancy period, it will no longer be classified as dormant by HMRC. This means that the company will then be active and required to complete annual tax returns and to pay taxes to HMRC.

Who Can Close A Limited Company

Who Can Close A Limited Company?

A limited company can only be closed by one of its directors. However, they will need the agreement of all directors or shareholders of the business before the application to close the limited company can be completed.

Once the agreement of all directors and shareholders has been granted, one of the directors will need to complete form DS01, which is the application to strike off. They will also need to pay a £10 filing fee to Companies House for the application to be processed.

If the company does not have a director, or the only director of the company has died, a new director will need to be appointed before the limited company can be closed. This will need to be agreed upon by the shareholders, who may hold a vote to appoint the new director.

Can You Set Up A Limited Company And Not Trade?

Setting up a limited company as dormant is more common than you may think. Many business owners choose to do this to protect their future company name and ensure that it will be theirs when they decide to begin trading at a later date.

For a company to be classified as dormant, it will need to not be trading. If the company begins trading at any point, it will no longer be classed as dormant and will need to file annual tax returns and pay taxes.

Although the company is not actively trading, it will still need to submit an annual confirmation statement. This is to confirm that the information held by Companies House is still up to date and accurate.

What Do I Do If My Company Has Not Traded?

If your company has not traded, you might be wondering exactly what you need to do. This will depend on whether your company has ever traded in the past.

For a limited company that has never traded, you will be able to file dormant company accounts with Companies House. To do this, you will use form AA02. HMRC considers any limited company to be dormant from the day that it is incorporated until the day it first begins trading. So, you won’t need to inform HMRC that your company is dormant if you have never traded.

If a company was once actively trading but later ceases trading, a company director will need to inform both Companies House and HMRC that the company is no longer trading. It will then be put into a dormant state for corporation tax.

Regardless of whether your limited company has ever traded in the past, you will still need to file an annual confirmation statement each year. The purpose of this document is to ensure that information held by Companies House is still up to date and accurate.

How Long Can A Company Stay Dormant?

Many companies begin life in a state of dormancy. This is often done if a new business owner wants to reserve a company name, preventing competitors from trading under their chosen name. You might also decide to make your limited company dormant if you are taking a break from your business, for example due to ill health or to go travelling. But how long can you limited company remain dormant?

You might be surprised to learn that there is no time limit for how long a company can stay dormant. This means that you could make your company dormant for just a few months, or for several years. However, your company cannot make any significant accounting transactions during its dormant period. If any transactions are made, your company will no longer be classed as dormant and you may be required to start submitting annual returns to HMRC and Companies House.

What Happens When A Limited Company Stops Trading?

If your limited company stops trading, you have two choices: to make the company dormant or to close the company. The option that you choose will depend on your future plans for the business.

If you plan to resume trading in the future, it’s best to make your company dormant. This means that you won’t need to file annual tax returns for your business, but your company will be waiting for you if you decide to start up again in the future. Whilst your limited company is dormant, you’ll still need to file an annual confirmation statement with Companies House to confirm that your company details are still up to date.

However, if you know for certain that you won’t be trading again under your limited company, you’ll need to close the company. This will mean that you won’t have to submit annual returns or confirmation statements, as your company will no longer exist as a legal entity.

If you’re unsure of the right option for your company, we’d always recommend consulting with a qualified accountant who can talk you through your options.

In Summary

Closing down your limited company can feel like a daunting prospect. After all, it’s essential that you follow the right process in order to avoid any potential penalties.

If your limited company never traded, you might be pleased to learn that the process of closing the company is somewhat simplified. To do so, you’ll need to complete form DS01 ‘application to strike off’ and submit it to Companies House along with a £10 filing fee.

We hope that you now understand how to close a limited company that never traded. If you need any help or advice, it’s always best to consult with a qualified accountant who can explain the process to you in more detail.

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